Cloud computing has been a part of the transportation management system (TMS) product range for some time now, and TMS applications of the technology continue to evolve.
“It’s moved from being an option to a significant preference,” said Dwight Klappich, a vice president with information technology (IT) research firm Gartner, Inc., in a recent interview about trends in freight transportation. System providers have responded with a number of cloud-based TMS solutions.
While we agree that cloud technology is on the rise, we’re also seeing a more nuanced change in the demand for the technology within the shipper community.
Small-size shippers with an annual transportation spend of less than $15 million were early adopters of cloud-enabled TMS solutions. The technology is a good fit for these small-tier players that can’t afford to invest in large-scale software suites. TMS offerings that harness cloud technology offer a less costly option over the long term.
Now we’re seeing more interest from mid-tier to high-end shippers in these solutions. In the past, companies with annual freight budgets of around $100 million or more showed a marked preference for large-scale software systems, but this mindset appears to be changing in favor of the cloud.
One reason for the shift is that cloud computing has become an established technology. Upmarket shippers have more confidence in TMS solutions that incorporate the technology than they did a few years ago.
A key component of this increase in trust is improved security. TMS providers have invested a great deal of time and money in securing cloud-based TMS solutions, an investment that is now paying off. Credentials such as Service Organization Control (SOC) reports—which provide information that shippers use to assess and address the compliance and financial reporting risks associated with third party TMS solutions—are an important part of this effort (for more on how TMC has completed the SOC report process, see Colby Burton’s Connect blog post, “Is Your Provider SOC Certified?”). Access to word class data centers, whether the facilities are owned—as is the case with TMC—or leased, has also bolstered confidence in cloud computing.
Large shippers also seem to be getting more comfortable with solutions that combine cloud technology with managed services offerings, but we will cover this in a future post.
Another development that has enhanced cloud technology for major shippers is the emergence of global solutions. Up until fairly recently, the storage and management of TMS data in the cloud was largely a regional activity. Today’s systems are much more scalable geographically, and, hence, increasingly attractive to companies that operate global freight networks.
There is still some way to go before acceptance rates among mid-tier and high-end buyers match those exhibited by small shippers. However, the cloud’s upward trajectory will surely continue as TMS providers respond to future changes in user demand.
 Gartner’s Dwight Klappich on TMS, The Supply Chain Television Channel, SC Digest, May 11, 2015